A technical expert has reminded advisers and tax agents to be aware of the specific tax treatments and procedures associated with early release superannuation lump sum payments when assisting their clients with this COVID-19 economic relief measure.
“[If the SMSFs makes an early release payment it] is not going to be required to issue a PAYG (pay as you go) summary for the amount,” Smarter SMSF chief executive Aaron Dunn noted during his organisation’s webinar today.
“It is a non-assessable, non-exempt income amount which means it’s not included in the individual’s tax return and not assessed for any social security benefits. So it’s not a withholding payment that is defined,” he added.
Dunn pointed out there were, however, other tax implications practitioners needed to take into account with this relief instrument.
“It is, however, required that when the benefits is paid out that we need to apply a proportion rule in respect to that amount,” he explained.
“This is where if you have a TRIS (transition to retirement income stream), where you have unrestricted monies, it must be coming from preserved monies or restricted non-preserved monies and it must coming out proportionately from a member’s interest [with regard to] any tax-free and taxable components of that member’s account.”
Dunn also reminded tax agents to acknowledge the role they are permitted to play with regard to assessing the eligibility of clients for the early super release instrument and the processing of these payments.
“This is something that needs to be done by the individual. It cannot be done by the tax agent on behalf of them and no one should be providing out their MyGov details and you should not be assisting them in that process,” he warned.
According to Dunn the ATO has already identified this issue and in its communication has reminded tax agents of their professional parameters in relation to this relief measure. He pointed out there could be consequences for practitioners who ignore these rules.
“It could potentially impact on [a tax practitioner’s] professional memberships.”